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Spain’s second-largest bank, Banco Bilbao Vizcaya Argentaria (BBVA), has reportedly started using blockchain technology, also known as a distributed ledger, to issue loans. The first such loan, worth €75 million ($91 million), was disbursed a few days ago, in April 2018.

BBVA released a public announcement on April 26, 2018, on its website, confirming that it had successfully managed to record the deal on a digital ledger.

The entire loan issuance process, including the application, negotiation and final stages, was carried out using blockchain technology; namely, a private chain based on Hyperledger for negotiation and completion conditions, while the Ethereum public chain was used to register unique identifier related to the transaction’s documentation, guaranteeing immutability.

The Spanish bank collaborated with Indra, a company that specializes in providing blockchain- based consultancy services. Given that the current procedure to obtain a corporate loan is cumbersome and involves a lot of paperwork, BBVA believes that its migration to the digital ledger technology will improve efficiency.

Ricardo Laiseca, BBVA’s Head of Global Finance for Corporate and Investment Banking, said:

“BBVA is involving its clients in project processes such as requirements definition, development, and implementation. In this way, BBVA provides its customers with not only the best financial solutions, but also the most advanced technical and innovative capabilities.”

Blockchain Technology in the World of Finance

The sheer size of corporate loans often subjects them to an overwhelming amount of scrutiny. Associates from the bank have to analyze every proposal and present their views in a meeting. The companies seeking capital also have to provide records about their balance sheet and other financial details. All in all, it becomes extremely tedious for any financial institution to keep track of the mountain of paperwork.

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With the help of blockchain technology, however, every document involved in the application can be time-stamped and distributed across the network. Since blockchains are inherently immutable, once a document is added to the network, it cannot ever be modified or deleted. The concept, first used by cryptocurrencies to prevent double spending, prevents financial records from being manipulated with.

The bank can use the blockchain to ensure complete transparency with the other party since it’s meant to be easily accessible via digital means. Furthermore, internal communication regarding the deal can also be recorded and logged on the blockchain for future reference as individual new blocks.

BBVA’s Earlier Attempts at Using Distributed Ledger Technology

In October 2017, BBVA, alongside its Mexican subsidiary BBVA Bancomer, announced that it was testing an FX matching application which had been developed by the R3 Blockchain Consortium in collaboration with Calypso technology.

Corda ended up being used by the two financial institutions to match an FX trade in real time with the help of Calypso’s cloud services.

Speaking about the future of ledger technology at BBVA, the Global Head of CIB Operations, Ramon Martinez Sobrado, said, “BBVA is very excited about this initiative for two reasons. Firstly, it gives us the opportunity to assess the impact of a disruptive technology such as DLT, to generate efficiencies in one of our strategic business lines. Secondly, it has the potential to set a new standard in customer experience on the servicing ground.”

Companies Involved in Commercial Blockchain Technology

Several companies have now been involved in making blockchain solutions tailor-made to their client preferences.

R3, the global consortium of over 200 financial institutions from across the globe developed Corda, a commercial blockchain two years in the making. These companies could prove to play a significant role in taking blockchain technology mainstream.

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